Three Profitable Companies to Watch: UNH, ELV, and TPL
When evaluating a company's financial strength, profitability is a key metric. Companies with high margins demonstrate their ability to generate consistent earnings while maintaining financial discipline.
UnitedHealth (UNH) has a trailing 12-month GAAP operating margin of 4.8%. The company serves over 100 million people across its various businesses and has a workforce of more than 400,000. UnitedHealth operates in the health insurance sector through its Optum division, which provides pharmacy benefits, primary care, and other healthcare services.
The company's annual revenue growth of 10.6% over the last five years is above the sector average, indicating the value of its products and services to customers. Its unparalleled scale, with $450.1 billion in revenue, allows it to spread administrative costs across a larger membership base. UnitedHealth's industry-leading return on capital of 19.2% demonstrates management's skill in finding high-return investments.
UnitedHealth is trading at $387.78 per share, or 18.5x forward P/E. Elevance Health (ELV), formerly known as Anthem, has a trailing 12-month GAAP operating margin of 3.8%. The company serves approximately 47 million medical members through its network-based managed care plans.
Elevance Health's massive revenue base of $198.7 billion gives it meaningful leverage when negotiating reimbursement rates. Its earnings growth has topped the peer group average over the last five years, with EPS compounding at 7.2% annually. The company's industry-leading return on capital of 26% demonstrates management's skill in finding high-return investments.
Elevance Health's stock price of $418.57 implies a valuation ratio of 14.6x forward P/E. Texas Pacific Land (TPL) has a trailing 12-month GAAP operating margin of 74.9%. The company owns roughly 868,000 acres in the Permian Basin and earns revenue from oil and gas royalties, water services, and land leases.
Texas Pacific Land's market share has increased this cycle as its 31.1% annual revenue growth over the last ten years was exceptional. Its attractive asset base leads to wonderful unit economics and a best-in-class gross margin of 94.9%. The company's impressive free cash flow profitability enables it to fund new investments or reward investors with share buybacks/dividends.
Texas Pacific Land trades at $367.72 per share, or 27.5x forward EV-to-EBITDA.